New York - The Dow Jones industrial average finally
reached new heights Tuesday, extending Wall Street's seven-year recovery with a
record closing level after climbing into uncharted territory in trading earlier
in the day.
Trader Anthony M. Mazur Jr. signals a trade in the S&P
500 Futures pit at the Chicago Mercantile Exchange near the end of the
trading day Tuesday, Oct. 3, 2006, in Chicago. The Dow Jones industrial
average surged past its all-time trading high of 11,750.28 Tuesday, taking
yet another step in its recovery from seven years of market turmoil. [AP
Photo] |
The index of 30 blue chip stocks ended the session at 11,727.34, wiping out
the previous record of 11,722.98.
Earlier, the Dow crossed its old trading high of 11,750.28, rising up to
11,758.95. Both of the previous records were set Jan. 14, 2000.
While investors welcomed the Dow's latest achievement, it comes at a time the
stock market is more conservative, even more muted, than the Wall Street of
early 2000. Then, investors were still piling exuberantly into high-tech stocks.
In 2006, the market's gains come only after investors' careful parsing of
economic data and corporate earnings reports.
Tuesday's advance came on the second straight day that oil prices fell
sharply, helping to calm fears about inflation and possible interest rate
increases. But the market as a whole has been choppy, with traditionally
defensive stock sectors such as pharmaceuticals and utilities leading the market
higher since its May and June decline, said Doug Johnston, head of US trading
at Adams Harkness in Boston.
"I think we break out to the all-time high, then we could get a blow-off
correction off of that," Johnston said.
The Dow, whose well-known large-cap stocks include aluminum producer Alcoa
Inc., discount retailer Wal-Mart Stores Inc. and the Walt Disney Co., has
recovered ahead of the broader Standard & Poor's 500 and the Nasdaq
composite index, which also peaked in early 2000. Those indexes were inflated —
overinflated in the case of the Nasdaq — by the dot-com bubble.
The S&P 500's high close was 1,527.46, and the index remains more than 12
percent away from that milestone. The Nasdaq is even further off its highs and
no one expects it to eclipse its record of 5,048.62 any time soon.
To reach new highs, the Dow had to recover not only from the high-tech
collapse, but also recession and the effects of the Sept. 11, 2001, terror
attacks. The stock market was further shaken by corporate scandals at companies
including Enron Corp. and WorldCom Inc., and the Dow sank to a five-year closing
low of 7,286.27 on Oct. 9, 2002, nearly 38 percent off its record high close.
The market's recovery was helped by more than four years of solid corporate
profit growth, and more recently, the Federal Reserve's decision to halt its
more than two-year string of interest rate hikes.
The Dow rose 56.99, or 0.49 percent, to close Tuesday at 11,727.34. The Dow
had briefly surpassed its closing high on Thursday and Monday before retreating.
The broader stock indicators also closed higher. The S&P 500 index was up
2.79, or 0.21 percent, at 1,334.11, and the Nasdaq rose 6.05, or 0.27 percent,
to 2,243.65.
Advancing issues led decliners by more than 8 to 7 on the New York Stock
Exchange, where consolidated volume came to 2.68 billion shares, compared with
2.15 billion Monday.
The decline in oil prices was the catalyst of the day. A barrel of light
crude settled at $58.68, down $2.35, on the New York Mercantile Exchange.
Oil prices have had a stunning fall from their intraday high for the year of
$78.40 a barrel, reached in July. Other commodity prices have dropped as well,
with gold descending from prices earlier this year that it hadn't seen for three
decades.
"When oil and gold start to back off, that's a sign that the economy is
slowing and inflation is not a fear," said Joseph Sunderman, vice president of
research and development, Schaeffer's Investment Research in Cincinnati.
The entire energy sector was lower, with Exxon Mobil Corp. down $1.59 at
$65.41 and Chevron Corp. down $1.57 at $62.94.
Bonds fell, with the yield on the benchmark 10-year Treasury note rising to
4.62 percent from 4.61 percent late Monday. The dollar was mixed against other
major currencies, while gold prices fell.
Marvell Technology Group Ltd. fell $2.29, or 12 percent, to $16.80 after it
said its third-quarter revenue would drop 10 percent from its second-quarter
revenue. Separately, the company also said it plans to restate past financial
results after a probe into its historical stock option practices turned up
discrepancies.
Quest Diagnostics Inc., which provides diagnostic testing services, dropped
$10.90, or 17.90 percent, to $50 after losing a nationwide contract with health
insurer UnitedHealthcare Inc. The existing agreement expires at the end of the
year.
Kohl's Corp., said its sales at stores open at least a year, a closely
watched measure of retail performance, rose 16.3 percent in September. The
low-price chain, which also boosted its third-quarter profit forecast, rose
$2.04 to $67.53.
Fresh concerns about the upcoming release of Sony Corp.'s
much-anticipated PlayStation 3 video game console and reports of erratic
performance dragged Sony shares down 63 cents to $39.10.
The Russell 2000 index of smaller companies fell 0.46, or 0.06 percent, to
718.35.
Overseas, Japan's Nikkei stock average closed down 0.08
percent. Britain's FTSE 100 dropped 0.35 percent, Germany's DAX index slid 0.12
percent, and France's CAC-40 fell 0.45 percent.
